BackEPFO contributions reduced; gains in take home, employee cost
43 million employees of 650,000 firms will benefit from the moveFor the next three months, statutory PF payments of employers and staff will be cut to 10% for firms covered by EPFO
PremiumNEW DELHI : The Centre on Wednesday reduced statutory deductions on employees’ provident fund (EPF) contributions for both formal sector employers and employees from the usual 12% each to 10%, for the May-July period. The move will benefit around 650,000 companies.
Existing social security laws make it mandatory for employees and employers to deposit 12% each, or 24% of the basic salary, plus housing allowance, as EPF deductions every month. The move will have twin benefits: a reduction in employee costs for private companies, while employees’ take-home pay will increase by 2%.
“Businesses need support to ramp up production over the next quarter. It is (also) necessary to provide more take home salary to employees and also give relief to employers in payment of provident fund dues. Therefore, statutory PF contributions of both employers and employees will be reduced to 10% each for all establishments covered by EPFO for the next three months," finance minister Nirmala Sitharaman said.
This will be applicable to all workers, or nearly 43 million employees across 650,000 establishments, who do not benefit from the PM Garib Kalyan package announced in March. The move also provides a ₹ 6,750-crore liquidity support to employers and employees during the covid-19 pandemic, she added.
However, central public sector enterprises and state PSUs will continue to pay 12% of the employer’s share, while employees contribute 10%. Besides, Sitharaman said the government will pay the EPF contribution of both the employer and the employee (12% each) for three more months for companies with a headcount of less than 100, and where 90% workers earn less than ₹15,000 per month.
In March, the government had said it will pay the amount for March, April and May as part of the PM Garib Kalyan scheme. Therefore, it will now be extended for June, July and August as well. “This will provide liquidity relief of ₹2,500 crore to 367,000 establishments, and for 72.22 lakh employees," the FM said.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
